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The power of migrant remittances

Dilip Ratha's picture

The developing world is expected to receive $414 billion in migrant remittances in 2013, an increase of 6.3 percent over the previous year. This is projected to rise to $540 billion by 2016.

India and China alone will represent nearly a third of total remittances to the developing world this year.  In India, remittances are larger than the country’s earnings from IT exports.



Globally, the world’s 232 million international migrants are expected to remit earnings worth $550 billion this year, and over $700 billion by 2016, says the latest issue of the World Bank’s Migration and Development Brief.

The Brief also highlights that the high cost of sending money through official channels continues to be an obstacle to the utilization of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home. The global average cost for sending remittances is 9 percent, broadly unchanged from 2012.

While remittance costs seem to have stabilized, banks in many countries have begun imposing additional ‘lifting’ fees on incoming transfers. Such fees can be as high as 5 percent of the transaction value.

Some international banks are also closing down the accounts of money transfer operators because of money laundering and terrorism financing concerns.

The Brief also points to need for reducing the high cost of migration, including recruitment costs and fees for visas, passports and residency permits.

Comments

Submitted by Antoine Hamel on

My understanding of the formal versus informal channels issue is incomplete: if “people seek out informal channels as their preferred means for sending money home”, how can we estimate that the total amount of remittances for the year 2012 was somewhere around 529 billion USD? Does it take into account an estimate of the informal remittances?

If indeed informal routes are preferred to regular channels, could we assume that total remittances are closer to one trillion?!? Now that would be a whole other ball game...

My second observation concerns the rise of the Philippines as the 3rd largest recipient of remittances, bypassing Mexico. We need to keep in mind that the Mexico-US migration corridor is the busiest in the world. And yet, Philippines’s labor-export policies have managed to create an array of migration networks, which now prove to be more profitable (in the long run) for the population than Mexico’s northern migration. What would be your analysis of this situation?

Submitted by Hannah Atom on

Encouraging Diaspora Development
Diaspora development is development from the people to the people. Migrants with lived experiences better understand the culture, business and political environment as well as the local needs of the targeted communities. It is the most effective and impactful form of investment with one hundred percent of every dollar sent going directly to those in need.

While tax incentives are offered by governments to encourage charitable donations to registered charities that help improve the lives of the most vulnerable in the world, this is however not the case with Diaspora development initiatives despite proven track record of significant development achievements.

The way forward is to encourage government to introduce tax relief incentive programs geared towards offsetting the cost of sending money. Migrant are donors, though not donating directly to registered charities to qualify for tax credits, individually and or as members of Diaspora associations “Invisible Charity”, they help make a difference in the lives of the poor worldwide like registered charities do.

Behind every dollar sent to a developing country for development purposes, there is a migrant or a group of migrants “Invisible Charity”. Without such programs in place, the Diaspora community is subjected to Double Taxation, (income tax paid to the government plus monthly remittances for development purposes). We need to encourage their generosity. There is absolute need for policy changes to address the situation.

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